SANMINA CORP

Previous wording

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including any statements regarding trends in future revenue or results of operations, gross margin, operating margin, expenses, earnings or losses from operations, or cash flow; any statements of the plans, strategies and objectives of management for future operations and the anticipated benefits of such plans, strategies and objectives; any statements regarding future economic conditions or performance; any statements regarding litigation or pending investigations, claims or disputes; any statements regarding the timing of closing of, future cash outlays for, and benefits of acquisitions and other strategic transactions, including our Indian joint venture; any statements regarding expected restructuring costs and benefits; any statements concerning the adequacy of our current liquidity and the availability of additional sources of liquidity; any statements regarding the potential impact of the COVID-19 pandemic on our business, results of operations and financial condition; any statements regarding the potential impact of supply chain shortages and inflation on our business; any statements regarding the future impact of tariffs and export controls on our business; any statements relating to our expectations concerning developments in the audit by the IRS of certain tax returns filed by us, including the potential impact of the IRS revenue agent’s report recently received by us; any statements relating to the expected impact of accounting pronouncements not yet adopted; any statements regarding future repurchases of our common stock; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Generally, the words “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue” and similar expressions identify forward-looking statements. Our forward-looking statements are based on current expectations, forecasts and assumptions and are subject to risks and uncertainties, including those contained in Part II, Item 1A of this report. As a result, actual results could vary materially from those suggested by the forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with the Securities and Exchange Commission (the “SEC”). Investors and others should note that Sanmina announces material financial information to our investors using our investor relations website (http://ir.sanmina.com/investor-relation…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including any statements regarding trends in future revenue or results of operations, gross margin, operating margin, expenses, earnings or losses from operations, or cash flow; any statements of the plans, strategies and objectives of management for future operations and the anticipated benefits of such plans, strategies and objectives; any statements regarding future economic conditions or performance; any statements regarding litigation or pending investigations, claims or disputes; any statements regarding the timing of closing of, future cash outlays for, and benefits of acquisitions and other strategic transactions, including our Indian joint venture; any statements regarding expected restructuring costs and benefits; any statements concerning the adequacy of our current liquidity and the availability of additional sources of liquidity; any statements regarding the potential impact of the COVID-19 pandemic on our business, results of operations and financial condition; any statements regarding the potential impact of supply chain shortages and inflation on our business; any statements regarding the future impact of tariffs and export controls on our business; any statements relating to future tax rates and our expectations concerning developments in the audit by the IRS of certain tax returns filed by us, including the potential impact of the IRS revenue agent’s report received by us in November 2023; any statements relating to the expected impact of accounting pronouncements not yet adopted; any statements regarding future repurchases of our common stock; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Generally, the words “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue” and similar expressions identify forward-looking statements. Our forward-looking statements are based on current expectations, forecasts and assumptions and are subject to risks and uncertainties, including those contained in Part II, Item 1A of this report. As a result, actual results could vary materially from those suggested by the forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with the Securities and Exchange Commission (the “SEC”). Investors and others should note that Sanmina announces material financial information to our investors using our investor relations website (http://ir.…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Our only reportable segment for financial reporting purposes is IMS, which represented approximately 80% of our total revenue for the three months ended December 30, 2023. Our CPS business consists of multiple operating segments which do not individually meet the quantitative thresholds for being presented as reportable segments. Therefore, financial information for these operating segments is combined and presented in a single category entitled “CPS”.

Current wording

Our only reportable segment for financial reporting purposes is IMS, which represented approximately 80% of our total revenue for the six months ended March 30, 2024. Our CPS business consists of multiple operating segments which do not individually meet the quantitative thresholds for being presented as reportable segments. Therefore, financial information for these operating segments is combined and presented in a single category entitled “CPS”.

Previous wording

Our business has been exposed to macroeconomic challenges such as inflation, supply chain constraints, foreign currency fluctuations, rising interest rates, market volatility, recession concerns and other factors that have been exacerbated by recent geopolitical conflicts such as the war in Ukraine and conflict in the Middle East. Although the supply chain constraints continue to ease, we expect to see some headwinds to our revenue growth at least in the short term due to customers making adjustments to inventory levels in some of our end markets, combined with softness in the economy. Despite these many challenges, we remain focused on improving our operations, building flexibility and efficiencies in our processes and adjusting our business models to changing circumstances. We intend to continue diversifying into mission critical markets, creating a portfolio with longer product life cycles and higher technology and complex products. As our end markets evolve and grow, our ability to optimize our product and portfolio mix towards higher value opportunities will continue to be an important driver for our business going forward. Additionally, given that maintaining low costs is a cornerstone to our success and growth, we proactively handle cost impacts through a combination of well-calibrated pricing actions and targeted cost-saving measures to enhance overall stockholder value.

Current wording

Our business continues to be exposed to macroeconomic challenges such as inflation, supply chain constraints, foreign currency fluctuations, rising interest rates, market volatility, recession concerns and other factors that have been exacerbated by geopolitical conflicts such as the war in Ukraine and conflict in the Middle East. Although the supply chain constraints have been easing, we expect to see headwinds to our revenue growth at least in the short term due to customers absorbing their finished goods inventory in some of our end markets. Despite these many challenges, we remain focused on improving our operations, building flexibility and efficiencies in our processes and adjusting our business models to changing circumstances. We intend to continue diversifying into mission critical markets, creating a portfolio with longer product life cycles and higher technology and complex products. As our end markets evolve and grow, our ability to optimize our product and portfolio mix towards higher value opportunities will continue to be an important driver for our business going forward. Additionally, given that maintaining low costs is a cornerstone to our success and growth, we proactively handle cost impacts through a combination of well-calibrated pricing actions and targeted cost-saving measures to enhance overall stockholder value.

Previous wording

The overall impact of these challenges on our financial condition and operating results will depend on the severity of the macroeconomic factors and the duration of geopolitical conflicts. There can be no assurance that the measures we take will counteract the negative impact of these challenges.

Current wording

The overall impact of the challenges on our financial condition and operating results will depend on the severity of the macroeconomic factors and the duration of geopolitical conflicts. There can be no assurance that the measures we take will counteract the negative impact of these challenges.

Previous wording

A complete description of our critical accounting policies and estimates is contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 filed with the SEC on November 16, 2023.

Current wording

The following should be read in conjunction with our critical accounting policies and estimates contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 filed with the SEC on November 16, 2023.

Previous wording

Net sales decreased to $1.9 billion for the three months ended December 30, 2023 from $2.4 billion for the three months ended December 31, 2022, a decrease of 20.4%. Sales by end market were as follows:

Current wording

Net sales decreased to $1.8 billion for the three months ended March 30, 2024 from $2.3 billion for the three months ended April 1, 2023, a decrease of 20.9%. Sales by end market were as follows:

Previous wording

Net sales decreased 20.4% in the three months ended December 30, 2023 compared to the three months ended December 31, 2022, primarily driven by reduced demand in our telecommunications end market and customers in other markets making adjustments to inventory levels. The impact of these factors was partially offset by new program wins.

Current wording

Net sales decreased 20.9% in the three months ended March 30, 2024 compared to the three months ended April 1, 2023 and 20.7% in the six months ended March 30, 2024 compared to the six months ended April 1, 2023 primarily due to reduced demand driven by customers continuing to absorb their finished goods inventory in some end markets, particularly telecommunications. The impact of this was partially offset by new program wins.

Previous wording

Gross margin was 8.6% and 8.3% for the three months ended December 30, 2023 and December 31, 2022, respectively. IMS gross margin increased to 7.6% for the three months ended December 30, 2023 from 6.9% for the three months ended December 31, 2022, primarily due to improved operating efficiencies and better margins from easing of supply chain constraints which, in the prior year, increased the cost of components and we passed the increased cost to our customers with little-to-no markup. CPS gross margin decreased to 13.0% for the three months ended December 30, 2023 from 14.5% for the three months ended December 31, 2022, primarily due to lower volume and reduced operating efficiencies.

Current wording

Gross margin was 8.5% and 8.3% for the six months ended March 30, 2024 and April 1, 2023, respectively. IMS gross margin increased to 7.6% for the six months ended March 30, 2024 from 7.2% for the six months ended April 1, 2023, primarily due to improved operational efficiencies. CPS gross margin decreased to 12.9% for the six months ended March 30, 2024 from 13.2% for the six months ended April 1, 2023, primarily due to lower volume and unfavorable product mix.

Previous wording

Selling, general and administrative expenses for the three months ended December 30, 2023 and December 31, 2022 were $65 million and $61 million, respectively. As a percentage of net sales, selling, general and administrative expenses were 3.5% and 2.6% for the three months ended December 30, 2023 and December 31, 2022, respectively. The increase in absolute dollars was primarily due to higher incentive compensation and an increase in our deferred compensation liability resulting from strong stock market performance that increased the market value of participant investment accounts.

Current wording

Selling, general and administrative expenses for the six months ended March 30, 2024 and April 1, 2023 were $134 million and $124 million, respectively. As a percentage of net sales, selling, general and administrative expenses were 3.6% and 2.7% for the six months ended March 30, 2024 and April 1, 2023, respectively. The increase in absolute dollars was primarily due to higher incentive compensation and an increase in our deferred compensation liability caused by strong stock market performance that increased the market value of participant investment accounts during the six months ended March 30, 2024.

Previous wording

Other expense for the three months ended December 30, 2023 and December 31, 2022 was $1 million and $7 million, respectively. The decrease in other expense was primarily due to a $3 million decrease in fees for accounts receivable factoring and a gain of $4 million in the market value of participant investment accounts in our deferred compensation plan compared to the same period in 2023.

Current wording

Other income (expense) for the six months ended March 30, 2024 and April 1, 2023 was $2 million and $(9) million, respectively. The increase in other income (expense) for the three months ended March 30, 2024 was primarily due to a $7 million decrease in fees for accounts receivable factoring and a $3 million increase in the market value of participant investment accounts in our deferred compensation plan compared to the same period in 2023.

Previous wording

Our provision for income taxes for the three months ended December 30, 2023 and December 31, 2022 was $21 million (26% of income before taxes) and $21 million (18% of income before taxes), respectively. The effective tax rate was lower for the year ended December 31, 2022 due to an approximate $8 million release of tax reserves.

Current wording

Our provision for income taxes for the six months ended March 30, 2024 and April 1, 2023 was $40 million (26% of income before taxes) and $47 million (21% of income before taxes), respectively. The effective tax rate was lower for the six months ended April 1, 2023 due to an $8 million release of tax reserves.

Previous wording

As a result of an audit by the Internal Revenue Service (“IRS”) for fiscal years 2008 through 2010, we received a Revenue Agent’s Report (“RAR”) on November 17, 2023 asserting an underpayment of tax of approximately $8 million for fiscal year 2009. The asserted underpayment results from the IRS’s proposed disallowance of a$503 million worthless stock deduction in fiscal year 2009. Such disallowance, if upheld, would reduce our available net operating loss carryforwards and result in additional tax and interest attributable to fiscal year 2021 and later years, which could be material. We disagree with the IRS’s position as asserted in the RAR and intend to vigorously contest this matter through the applicable IRS administrative and judicial procedures, as appropriate. We do not expect resolution of this matter within twelve months and cannot predict with any certainty the timing of such resolution. Although the final resolution of this matter remains uncertain, we continue to believe that it is more likely than not our tax position will be sustained. However, an unfavorable resolution of this matter could have a material adverse impact on our condensed consolidated financial statements.

Current wording

As a result of an audit by the Internal Revenue Service (“IRS”) for fiscal 2008 through 2010, we received a Revenue Agent’s Report (“RAR”) on November 17, 2023 asserting an underpayment of tax of approximately $8 million for fiscal 2009. The asserted underpayment results from the IRS’s proposed disallowance of a$503 million worthless stock deduction in fiscal 2009. Such disallowance, if upheld, would reduce our available net operating loss carryforwards and result in additional tax and interest attributable to fiscal 2021 and later years, which could be material. We disagree with the IRS’s position as asserted in the RAR and intend to vigorously contest this matter through the applicable IRS administrative and judicial procedures, as appropriate. We do not expect resolution of this matter within twelve months and cannot predict with any certainty the timing of such resolution. Although the final resolution of this matter remains uncertain, we continue to believe that it is more likely than not our tax position will be sustained. However, an unfavorable resolution of this matter could have a material adverse impact on our condensed consolidated financial statements.

Previous wording

Cash and cash equivalents were $632 million at December 30, 2023 and $668 million at September 30, 2023. Our cash levels vary during any given quarter depending on the timing of collections from customers and payments to suppliers, borrowings under our credit facilities, sales of accounts receivable under numerous programs we utilize, repurchases of common stock and other factors. Our working capital was $1.8 billion as of December 30, 2023 and September 30, 2023.

Current wording

Cash and cash equivalents were $651 million at March 30, 2024 and $668 million at September 30, 2023. Our cash levels vary during any given quarter depending on the timing of collections from customers and payments to suppliers, borrowings under our credit facilities, sales of accounts receivable under numerous programs we utilize, repurchases of common stock and other factors. Our working capital was $1.8 billion as of March 30, 2024 and September 30, 2023.

Previous wording

Net cash provided by operating activities was $126 million and $37 million for the three months ended December 30, 2023 and December 31, 2022, respectively. Our working capital metrics tend to fluctuate from quarter-to-quarter based on factors such as the linearity of our shipments to customers and purchases from suppliers, customer and supplier mix, the extent to which we factor customer receivables and the negotiation of payment terms with customers and suppliers. These fluctuations can significantly affect our cash flows from operating activities.

Current wording

Net cash provided by operating activities was $198 million and $102 million for the six months ended March 30, 2024 and April 1, 2023, respectively. Our working capital metrics tend to fluctuate from quarter-to-quarter based on factors such as the linearity of our shipments to customers and purchases from suppliers, customer and supplier mix, the extent to which we factor customer receivables and the negotiation of payment terms with customers and suppliers. These fluctuations can significantly affect our cash flows from operating activities.

Previous wording

During the three months ended December 30, 2023, we generated $109 million of cash primarily from earnings, excluding non-cash items, and generated $17 million of cash due primarily to decreases in accounts receivable and inventory, which were partially offset by a decrease in accounts payable. Individual components of operating assets and liabilities fluctuate for a number of reasons, including linearity of purchases and sales, the mix of customer and supplier payment terms within our accounts receivable and accounts payable, and the amount and timing of sales of accounts receivable. The decrease in accounts receivable, inventory and accounts payable was primarily attributable to a decrease in business volume.

Current wording

During the six months ended March 30, 2024, we generated $213 million of cash primarily from earnings, excluding non-cash items, and used $15 million of cash due primarily to decreases in accounts payable and accrued liabilities, which were partially offset by a decrease in accounts receivable and inventories. The decrease in accounts receivable, inventory and accounts payable was primarily attributable to a decrease in business volume.

Previous wording

Net cash used in investing activities was $35 million and $37 million for the three months ended December 30, 2023 and December 31, 2022, respectively. During the three months ended December 30, 2023 and December 31, 2022, we used $34 million and $37 million, respectively, of cash for capital expenditures.

Current wording

Net cash used in investing activities was $65 million and $101 million for the six months ended March 30, 2024 and April 1, 2023, respectively, primarily related to cash for capital expenditures.

Previous wording

Net cash provided by (used in) financing activities was $(128) million and $204 million for the three months ended December 30, 2023 and December 31, 2022, respectively. During the three months ended December 30, 2023, we used $116 million of cash to repurchase common stock (including $10 million paid to applicable tax authorities in connection with these repurchases) and repayment of $13 million of borrowings. During the three months ended December 31, 2022, we received $216 million from sale of shares to Reliance Strategic Business Ventures Limited (“RSBVL”), used $8 million of cash to repurchase common stock primarily related to employee tax withholding on vested restricted stock units and repaid $4 million of long-term debt.

Current wording

Net cash provided by (used in) financing activities was $(150) million and $186 million for the six months ended March 30, 2024 and April 1, 2023, respectively. During the six months ended March 30, 2024, we used $133 million of cash to repurchase common stock (including $25 million paid to applicable tax authorities in connection with these repurchases) and repayment of $17 million of borrowings. During the six months ended April 1, 2023, we received $216 million from sale of shares to Reliance Strategic Business Ventures Limited (“RSBVL”), used $22 million of cash to repurchase common stock primarily related to employee tax withholding on vested restricted stock units and repaid $9 million of long-term debt.

Previous wording

During the three months ended December 30, 2023 and December 31, 2022, we repurchased 2 million shares of our common stock for $106 million under stock repurchase programs authorized by the Board of Directors. These programs have no expiration dates and the timing of repurchases will depend upon capital needs to support the growth of our business, market conditions and other factors. Although stock repurchases are intended to increase stockholder value, they also reduce our liquidity. As of December 30, 2023, an aggregate of $174 million remained available under these programs.

Current wording

During the six months ended March 30, 2024 and April 1, 2023, we repurchased 2 million and 4 thousand shares of our common stock for $107 million and $0.2 million, respectively, under stock repurchase programs authorized by the Board of Directors. These programs have no expiration dates and the timing of repurchases will depend upon capital needs to support the growth of our business, market conditions and other factors. Although stock repurchases are intended to increase stockholder value, they also reduce our liquidity. As of March 30, 2024, an aggregate of $172 million remained available under these programs.

Previous wording

Under each of the programs noted above, we sell our entire interest in a trade receivable for 100% of face value, less a discount. During the three months ended December 30, 2023 and December 31, 2022, we sold approximately $407 million and $796 million, respectively, of accounts receivable under these programs. As of December 30, 2023 and September 30, 2023, $146 million and $162 million, respectively, of accounts receivable sold under the RPA and subject to servicing by us remained outstanding and had not yet been collected. Our sole risk with respect to receivables we service is with respect to commercial disputes regarding such receivables. Commercial disputes include billing errors, returns and similar matters. To date, we have not been required to repurchase any receivable we have sold due to a commercial dispute. Additionally, we are required to remit amounts collected as servicer on a weekly basis to the financial institutions that purchased the receivables. As of December 30, 2023 and September 30, 2023, $24 million and $33 million, respectively, had been collected but not yet remitted. This amount is classified in accrued liabilities on the condensed consolidated balance sheets.

Current wording

Under each of the programs noted above, we sell our entire interest in a trade receivable for 100% of face value, less a discount. During the six months ended March 30, 2024 and April 1, 2023, we sold approximately $797 million and $1.7 billion, respectively, of accounts receivable under these programs. As of March 30, 2024 and September 30, 2023, $144 million and $162 million, respectively, of accounts receivable sold under the RPA and subject to servicing by us remained outstanding and had not yet been collected. Our sole risk with respect to receivables we service is with respect to commercial disputes regarding such receivables. Commercial disputes include billing errors, returns and similar matters. To date, we have not been required to repurchase any receivable we have sold due to a commercial dispute. Additionally, we are required to remit amounts collected as servicer on a weekly basis to the financial institutions that purchased the receivables. As of March 30, 2024 and September 30, 2023, $8 million and $33 million, respectively, had been collected but not yet remitted. This amount is classified in accrued liabilities on the condensed consolidated balance sheets.

Previous wording

In the ordinary course of business, we are or may become party to legal proceedings, claims and other contingencies, including environmental, regulatory, warranty and employee matters and examinations by government agencies. As of December 30, 2023, we had accrued liabilities of $35 million related to such matters. We cannot accurately predict the outcome of these matters or the amount or timing of cash flows that may be required to defend ourselves or to settle such matters or that these reserves will be sufficient to fully satisfy our contingent liabilities.

Current wording

In the ordinary course of business, we are or may become party to legal proceedings, claims and other contingencies, including environmental, regulatory, warranty and employee matters and examinations by government agencies. As of March 30, 2024, we had accrued liabilities of $40 million related to such matters. We cannot accurately predict the outcome of these matters or the amount or timing of cash flows that may be required to defend ourselves or to settle such matters or that these reserves will be sufficient to fully satisfy our contingent liabilities.

Previous wording

Our liquidity is largely dependent on changes in our working capital, including sales of accounts receivable under our receivables sales programs and the extension of trade credit by our suppliers, investments in manufacturing inventory, facilities and equipment, repayments of obligations under outstanding indebtedness and repurchases of common stock. We generated $126 million of cash from operations for the three months ended December 30, 2023. Our primary sources of liquidity as of December 30, 2023 consisted of (1) cash and cash equivalents of $632 million (an aggregate of $217 million of our cash is held by Sanmina SCI India Private Limited (“SIPL”), our existing Indian manufacturing entity, that may not be used for general corporate purposes and must be retained in SIPL to fund its operations); (2) our Credit Agreement, under which $787 million, net of outstanding borrowings and letters of credit, was available; (3) our foreign short-term borrowing facilities of $71 million, all of which was available; (4) proceeds from the sale of accounts receivable under our receivables sales programs and (5) cash generated from operations. Subject to satisfaction of certain conditions, including obtaining additional commitments from existing and/or new lenders, we may increase the revolving commitments under the Credit Agreement up to an additional $200 million.

Current wording

Our liquidity is largely dependent on changes in our working capital, including sales of accounts receivable under our receivables sales programs and the extension of trade credit by our suppliers, investments in manufacturing inventory, facilities and equipment, repayments of obligations under outstanding indebtedness and repurchases of common stock. We generated $198 million of cash from operations for the six months ended March 30, 2024. Our primary sources of liquidity as of March 30, 2024 consisted of (1) cash and cash equivalents of $651 million (an aggregate of $210 million of our cash is held by Sanmina SCI India Private Limited (“SIPL”), our existing Indian manufacturing entity, that may not be used for general corporate purposes and must be retained in SIPL to fund its operations); (2) our Credit Agreement, under which $787 million, net of outstanding borrowings and letters of credit, was available; (3) our foreign short-term borrowing facilities of $71 million, all of which was available; (4) proceeds from the sale of accounts receivable under our receivables sales programs and (5) cash generated from operations. Subject to satisfaction of certain conditions, including obtaining additional commitments from existing and/or new lenders, we may increase the revolving commitments under the Credit Agreement up to an additional $200 million.

Previous wording

As of December 30, 2023, 33% of our cash balance was held in the United States. Should we choose or need to remit cash to the United States from our foreign locations, we may incur tax obligations which would reduce the amount of cash ultimately available to the United States. We believe that cash held in the United States, together with liquidity available under our Credit Agreement and cash from foreign subsidiaries that could be remitted to the United States without tax consequences, will be sufficient to meet our United States liquidity needs for at least the next twelve months.

Current wording

As of March 30, 2024, 31% of our cash balance was held in the United States. Should we choose or need to remit cash to the United States from our foreign locations, we may incur tax obligations which would reduce the amount of cash ultimately available to the United States. We believe that cash held in the United States, together with liquidity available under our Credit Agreement and cash from foreign subsidiaries that could be remitted to the United States without tax consequences, will be sufficient to meet our United States liquidity needs for at least the next twelve months.